Bitcoin’s price fell sharply on Tuesday, plunging 19% from $ 52,956 to $ 42,900 yesterday, undoing recent gains and wiping out more than $ 180 billion in market value. El Salvador, the country that officially introduced Bitcoin as legal tender yesterday, was unaffected by the slump and instead used capital from it. The country simply bought another 150 BTC once the price was right.
According to analysts, the reason for the decline was clear. Investors opted to sell while the price was still high after Bitcoin recently failed to surpass the significant $ 53,000 limit. The digital currency had appreciated 12% since the end of last month. In April, Bitcoin hit an all-time record of $ 64,895.
El Salvador is the first country in the world to legally introduce Bitcoin and accept it as legal tender. Every resident who opens an account in the Chivo government’s bitcoin wallet will receive a $ 30 bitcoin gift. The Central American country recently bought 400 Bitcoins for around 17.5 million euros. The previous Tuesday, Salvadorans who tried to download Chivo’s digital wallet discovered that it was not available in the popular app stores. A later tweet from President Bukele mentioned that the government had temporarily removed the plug to plug in more servers to cope with overwhelming demand.
Although many have tried to open Chivo, most Salvadorans do not all run to the newly opened Bitcoin machines to convert their dollars into Bitcoin. Surveys have shown that Salvadorans are skeptical about the use of the digital currency, largely because they believe its value fluctuates too much. People are used to a very stable US dollar.
The fact that Bitcoin’s value fell so sharply on day one cannot help build the trust that President Nayib Bukele seeks in his citizens. And distrust of the digital currency peaked when more than 1,000 people demonstrated in El Salvador’s capital, San Salvador, on Tuesday to protest against the introduction of Bitcoin as legal tender.
Companies in El Salvador must accept the digital currency in exchange for goods and services. The government will also accept bitcoins for paying taxes. But protesters feel that the poorest are struggling with technology to make Bitcoin accessible to them. Right now, almost half of the population has no internet connection or very poor connectivity.
But President Bukele is full of trusts. “Like all innovations, the Bitcoin process in El Salvador has a learning curve,” said Bukele in a tweet. “Not everything is accomplished in a day or in a month.”
Bitcoins will make it cheaper for El Salvadorans who work overseas, mostly in the United States, to send money to their families in El Salvador. It costs Salvadorans hundreds of millions of dollars in bank commissions each year to transfer US dollars to their family members.
Regardless of the possible price fluctuations, El Salvador plans to buy a lot more bitcoins, President Nayib Bukele said earlier on Twitter. In 2020, the small country had a gross domestic product of more than $ 24 billion. According to the latest figures from the World Bank, 29% of the population live below the poverty line. The country will also still accept US dollars for the time being.